The Dynamics of Successful Owner/Contractor Engagements

The success of contracted engagements (including capital projects,
plant turn-arounds, and supplemental labor or maintenance agreements)
is based on establishing effective relationships and communications
between the owner and the contractor management teams. Large, complex
contract engagements necessitate significant planning and cooperative
owner/ contractor efforts that involve executing well-developed plans
to help ensure that contractual issues and project failures do not
occur. In addition, since the daily contracted work environment is
filled with variables, the owner/contractor management teams must
apply flexibility in the daily decision-making processes. Still, daily
activities must be planned and documented with expectations to help
ensure a successful outcome.

To begin, we must be clear about the definition of “owner.” In this
case, an owner can be defined as the party in control of the
contracted resource, and may or may not be a stakeholder in the
capital asset for which the contractor’s activities are conducted. For
instance, a manufacturing corporation may determine the need for a
production or process expansion. Lacking the internal resources to
engage further, the corporation hires and fully funds an engineering
and construction firm (E&C or EPC) to manage the entire project
scope. Ultimately, the E&C firm contracts with general contractors
(GC) to perform the project work. In this circumstance, there are two
separate owner/contractor relationships:

1) The corporation and the E&C firm

2) The E&C firm and the GC(s)

To help ensure a successful conclusion to the contracted work, the
dynamics of both relationships are integral, as is the ability of the
E&C firm to effectively bridge the needs of both the corporation
and the GC(s). In some contracted environments, the owner/contractor
relationship is often as simple as a service contractor occasionally
meeting with a company contract administrator to review performance
and future expectations. Here a much simpler engagement exists.
Regardless, effective relationships and communications for successful
outcomes are necessary.

Effective Communication – A Critical Component

For the purpose of this discussion, effective communications can be
described as follows:

Contractual – everything that is captured in the contract’s
standard language, Scope of Work (SOW), and specified terms and
conditions (T&C)

Planned – all developed information that is communicated as a
result of pre-contractual and early contract planning, including
design, scheduling, constructability, material, equipment, safety
considerations (process hazard assessment/hazard safety assessment,
engineered employee fall protection), etc.

In order to make sure that the owner and contractor are “on the same
page,” it is critical that they have a well written, complete contract
that can be executed with a minimum of irresolvable differences. In
addition, it is essential that the owner’s contract administrator
obtain critical input from all relevant parties involved with the
project before incorporating this feedback into the T&C. This will
help create a well-written contract. At minimum, input from
operations, engineering, finance, environmental and safety is expected
in the T&C development. Once the T&C are generated, all owner
participating parties should review to help ensure that:

No loopholes exist.

The T&C expectations are reasonable and attainable.

There are means to measure contractor performance once the
contract is executed.

There are remedies for non-performance.

The Importance of Planning or Front-End Loading

Ed Merrow, founder and President of Independent Project Analysis,
Inc., believes,” contractors almost always succeed when the project
has a strong business case, fully aligned stakeholders,
bought-in-sponsors, an integrated owner team, and best practical
front-end loading.”

DuPont places a huge emphasis on planning or “front-end loading” in
construction (FEL). From our perspective, planning for capital
projects and turn-arounds can take years and is absolutely critical.
Overall, our planning processes are regarded among the best globally
when it comes to desired outcomes of finishing on-time, within budget,
and without injury or capital losses.

Regardless of the nature or size of the contract, the owner must
invest in the planning process, and the documentation to support this
planning must be readily conveyed to the contractor up-front as much
as possible. If something is not addressed within the contract, it
must be clearly understood in bidders’ meetings, and once awarded, the
contract should be reviewed again during the pre-job start-up meeting.

In addition, all parties must clearly understand and acknowledge the
scope and ramifications of the plan specifics. Next, the “who” as it
relates to each party, must be clearly communicated because this is
frequently where gaps become readily apparent later in the contracting
engagement and where communication is most critical. In short, it is
imperative to clearly define who the real customers and suppliers are
as it relates to the project. For example, having a pre-job meeting
with a civil contractor management team that has no carpenter, rebar
steel, laborer, concrete, or heavy equipment supervision present
creates gaps in understanding and execution that causes work
slowdowns, overruns and change orders.

A Focus on Situational Considerations

The best gauge of effective owner/contractor communications can be
seen in daily supervisor meetings where situational considerations are
addressed. Often times the people engaged in communications are lower
level supervisors that are “in touch” with the work pulse. These daily
decisions often have little impact on the outcome of the contract;
however, collectively, they can make the difference in the overall
success of the contract. Likewise, although infrequent, an improper
daily decision could have devastating effects.

It is within the confines of daily communications that issues over
safety, environmental and capital have the greatest potential for
compromise. As a result, the potential for incidents and injuries also
increases. On the other hand, well managed supervisor meetings,
whether daily for large contracting engagements, or weekly for the
small service contracts, reinforce the owner’s culture, and
contractors’ accordance.

There are several ways to help ensure that the owner and contractor
are working as a team via this communications venue, including:

Begin each and every meeting with safety. Use contract
planning to develop daily safety topics in advance, but be flexible.
Often times, the present provides a relevant option for a safety
contact, including adverse weather, a “near-miss” incident the prior
day, unforeseen co- occupancy issues or a change order.

Train for and implement daily supervisory job safety analyses
(JSAs) that cover the scope of the work scheduled that day. Be
certain that the crew for which the supervisor has responsibility
contributes to, and agrees to by signature, the job safety tasks
defined. Share the responsibility with the crews.

At day’s end, review the results of the activity, and assess any
issues that did not go as planned for corrective action. Include the
topic the next morning with the crew in the tool box talk.

Finally, there is no better evidence of dedication and cultural
influence than for the owner and supervising contractor to “walk the
walk, and talk the talk”. It is important that they are seen together,
addressing issues as a team with common goals and objectives in mind.
The influence of teamwork is contagious. If issues are addressed more
frequently as a team, there will be more control over the project and
it will be less likely that unpleasant surprises occur.